Financing with a twist

More groups explore how Pay For Success financing can help kids

After bursting onto the national scene a few years ago, Pay For Success financing is gaining traction among Colorado school districts and early childhood organizations.

The Early Childhood Council of Boulder County and Adams County School District 50 are both exploring the British-born financing mechanism as a way to pay for underfunded early childhood programs. Aurora Public Schools may use the model as well, to beef up college and career readiness.

The exploratory work by all three groups unfolds as state law-makers consider Pay For Success legislation for the second year in a row. Last year’s bill, which was introduced late in the session and focused exclusively on early childhood programs, died in committee.

Chalkbeat reporting on PFS

Pay For Success resources

Common PFS focus areas 

  • Early childhood
  • Recidivism
  • Chronic homelessness
  • Juvenile Justice
  • Asthma

The idea behind Pay For Success, or PFS, is that private investors or philanthropists pay upfront for evidence-based social programs. If those programs save public money by preventing costly interventions such as emergency room visits or special education services, the investors are repaid with interest.

The potential savings accrued from Pay For Success projects are calculated by comparing the public costs of an individual or group after an intervention program to the public costs of an individual or group with no intervention.

For example, a school district considering a preschool-based Pay For Success project might use national studies showing that high-quality preschool reduces special education enrollment by 15 percent, to estimate its prospective savings.

If for some reason a Pay For Success project doesn’t yield the hoped-for savings, the investors lose some or all of their money. Therein lies part of the appeal of Pay For Success. While it can inject new funding into effective prevention programs, there is relatively little financial risk to the public entities that stand to benefit from those programs long-term.

When it comes to projects targeting children and youth, the Early Childhood Council of Boulder County is farthest along in the complicated development process. (Among all Colorado projects, a Denver effort to address chronic homelessness among adults is closest to fruition.)

The council is studying the possible expansion of a 30-year-old home-visiting program—the “Community Infant Program”—that aims to prevent child abuse and neglect. If the current cost-modeling work shows an expansion is feasible, the project could launch in 2017 with an five-year investment of $2-4 million. It’s not yet clear who the project’s investors would be.

“We’re not seeing any yellow or red lights. They’re all green,” said Bobbie Watson, executive director of the council.

Growing school district interest

In the last few months, local school districts have also begun testing the waters of Pay For Success. Both Adams 50 and Aurora have applied for grants through the University of Utah Policy Innovation Lab, one of a several intermediary organizations distributing federal dollars to build PFS capacity. The grants of up to $250,000 would primarily pay for new in-house employees to help develop PFS projects in each district.

Adams 50 is also an alternate finalist for a grant through the Boston-based Third Sector Capital Partners, another intermediary for Pay For Success capacity-building grants.

The two districts’ bid for such funding speaks to one of the biggest challenges facing organizations interested in the Pay For Success path: the need for money and expertise long before a project launches.

“This is the big problem with PFS right now,” said Mary Wickersham, a consultant working on the Boulder project. “There’s this dearth of funding on the front end.”

While Watson and her team raised around $150,000 to cover those costs, it’s not easy.

Of the more than 40 Pay For Success proposals received in response to a state “Request For Information” in 2013, only two–Denver’s chronic homelessness project and Boulder’s home-visiting project–are actively moving forward.

Dozens of others, “some portion of which could be great deals … are kind of languishing right now for want of support to get them to the finish line,” said Wickersham.

Preschool potential

Following in the footsteps of school districts in Chicago and Salt Lake City, Adams 50 is considering a PFS project that would expand preschool access. Specifically, the district and two community partners, Growing Home and the Early Childhood Partnership of Adams County, want to increase the number of full-day preschool slots in the district and add parenting classes.

The hope is that such a PFS program would decrease special education costs and improve early reading scores, said Mat Aubuchon, director of early childhood education in Adams 50.

“I think it’s exciting: a potentially totally different kind of funding stream in [early childhood education],” he said.

While half-day preschool is relatively accessible in the district, Aubuchon said there are very few state-funded full-day slots and most families can’t afford to pay for it out of pocket. Three-quarters of the district’s students are eligible for free or reduced-price meals, a proxy for low-income status.

The district and its partners are just starting to hold meetings on Pay For Success with potential investors in the philanthropic community, said Aubuchon. The earliest any project could launch is the 2016-17 school year.

“Obviously, we’re at the very infancy state of even exploring something like this,” he said.

Creating a college-bound culture

Meanwhile, Aurora Public Schools, in partnership with the Aurora Public Schools Foundation, is looking at Pay For Success with an eye toward improving outcomes for older kids.

Borrowing a concept used in Denver schools, the project under consideration would establish “Future Centers” in district high schools where students would get advising on all matters related to college and career readiness. The goal is to strengthen the district’s college-bound culture, decrease drop-out rates, and reduce the need for remediation.

“There’s some really clear metrics of deliverables” around post-secondary readiness, said Cheryl Miller, the district’s assistant director of grants and federal programs. “It perfectly aligns to our new strategic plan.”

Among the state’s 15 largest school districts, Aurora had the lowest on-time graduation rate last year: 55.9 percent. Statewide, 77.3 of high school students graduated on time.

Miller said the district initially considered a preschool-based PFS initiative, but wanted to differentiate itself by trying something outside the early childhood arena.

The goal was to be “doubly innovative,” she said.

More money for mental health

The Early Childhood Council of Boulder County began exploring Pay For Success in late 2013. Intent on using the model to make a positive impact on the youngest children, the council looked at six home-visiting programs already operating in the county.

“My board has particular interest in the birth to three population,” said Watson. “That’s where you get your best return on investment.”

The Community Infant Program, in which nurses and psychotherapists work with families around mental health, rose to the top of the list.

“We have a 30-year track record and I think people were pretty excited about the longevity in the community,” said Program Director Janet Dean.

The program, which has 20 employees and an annual budget of $1.5 million, helps parents create healthy relationships with their babies by addressing issues ranging from post-partum depression to anger, stress and mental illness.

Absent such intervention, children may experience abuse or other types of toxic stress that have long-term consequences on their health, education and well-being. There are financial consequences too, often incurred by the public sector. These can include expensive hospitalizations, court proceedings or entry into the foster care system.

If the number-crunching underway now confirms expectations, Pay For Success funding represents a front-end investment that could defray those back-end costs.

Dean said there are usually 20-30 families waiting for services from the Community Infant Program. An expansion would allow the organization to better serve families in the mountains on the west side of the county and those around Longmont, Lafayette and Louisville.

“We have families waiting for our service,” she said. “Mental health is just not funded, in general, to the level it needs to be funded.”

performance based

Aurora superintendent is getting a bonus following the district’s improved state ratings

Aurora Public Schools Superintendent Rico Munn. (Photo by Andy Cross/The Denver Post)

Aurora’s school superintendent will receive a 5 percent bonus amounting to $11,820, in a move the board did not announce.

Instead, the one-time bonus was slipped into a routine document on staff transitions.

Tuesday, the school board voted on the routine document approving all the staff changes, and the superintendent bonus, without discussion.

The document, which usually lists staff transfers, resignations, and new hires, included a brief note at the end that explained the additional compensation by stating it was being provided because of the district’s rise in state ratings.

“Pursuant to the superintendent’s contract, the superintendent is entitled to a one-time bonus equal to 5 percent of his base salary as the result of the Colorado Department of Education raising APS’ district performance framework rating,” the note states.

The superintendent’s contract, which was renewed earlier this year, states the superintendent can receive up to a 10 percent bonus per year for improvements in state ratings. The same bonus offer was in Munn’s previous contract with the district.

The most recent state ratings, which were released in the fall, showed the state had noted improvements in Aurora Public Schools — enough for the district to be off the state’s watchlist for low performance. Aurora would have been close to the five years of low-performance ratings that would have triggered possible state action.

“I am appreciative of the Board’s recognition of APS’ overall improvement,” Superintendent Munn said in a statement Wednesday. “It is important to recognize that this improvement has been thanks to a team effort and as such I am donating the bonus to the APS Foundation and to support various classroom projects throughout APS.”

This is the only bonus that Munn has received in Aurora, according to a district spokesman.

In addition to the bonus, and consistent with his contract and the raises other district employees will receive, Munn will also get a 2.93 percent salary increase on July 1. This will bring his annual salary to $243,317.25.

At the end of the board meeting, Bruce Wilcox, president of the teachers union questioned the way the vote was handled, asking why the compensation changes for teachers and compensation changes for other staff were placed as separate items on the meeting’s agenda, but the bonus was simply included at the bottom of a routine report, without its own notice.

“It is clear that the association will unfortunately have to become a greater, louder voice,” Wilcox said. “It is not where we want to be.”

budget book

Aurora school board approves the budget, but will continue transparency discussions to change the level of detail available

A student works at Tollgate Elementary School in Aurora. (Photo by Nic Garcia, Chalkbeat)

Aurora school board members on Tuesday unanimously approved next school year’s $746.8 million budget after months of heated discussions over whether the district had provided the public enough detail about it.

The budget represents a 4.7 percent drop from the current year, because of declines in enrollment and thus state dollars. It does include money for salary increases, but it was Aurora’s transparency, or lack of it, that has generated the most controversy.

But just because the budget was approved doesn’t mean the transparency discussion has ended.

New board member Kyla Armstrong-Romero — the first to press for more information after district officials said they planned on raising student athletic fees — said Tuesday she will keep asking the district for more detailed budget documents.

“I understand the necessity to approve the budget on time,” Armstrong-Romero said. But, she said, she’s back to the drawing board to see how to go about making more requests.

Brett Johnson, Aurora’s chief financial officer, said releasing more detail would be better, but said his department didn’t have the capacity to change what it provides quickly.

“We want to make a budget book that is more user friendly,” Johnson told the board. But he added, “there would be a lot of upfront costs associated with rebuilding and rethinking the style of this budget.”

As an example, he said, the Cherry Creek district has double the budget staff that Aurora does, including one full-time employee that collects numbers from schools.

After November’s election, Aurora’s new board majority began to insist on more budget detail – in contrast with the previous board, which sought budget overviews.

Aurora Public Schools has had four budget directors in four years, including Johnson who started 15 months ago. The finance department has struggled to maintain consistency.

In recent years, board members had prioritized accesible information that could easily make sense to anyone. Officials pointed to the creation of a two-page budget summary for the first time last year, and the launch last summer of an interactive website that breaks down budget allocations.

Armstrong-Romero said she wanted more detail to understand where next year’s budget was different from the current year’s budget or previous years’ budgets. She asked for comparable line-item documents, and explanations of what made up big buckets of spending.

Specifically, she asked for numbers to understand the tradeoffs of not making certain budget cuts.

Superintendent Rico Munn told the board that he could not ask staff to create multiple proposed budgets just to detail all the various scenarios.

Board members talked about other district’s budgets. Denver Public Schools, for example, launched a new budget book earlier this year that includes a breakdown of where every dollar allocated per student gets spent.

“For me, it’s inconceivable that our community does not merit the same level of transparency,” Armstrong-Romero said.

Munn said that there are differences in communities, but disputed the thought that different information meant less transparency.

“Our community certainly deserves transparency, but that looks different ways in different communities,” Munn said. “It may be fair to say we haven’t struck the right tone or that there’s room to improve, which we’ve already indicated, but clearly we are not trying to hide anything.”

Some board members said that they didn’t need details down to how much was spent on each pencil at each school, but board member Kevin Cox said the conversation doesn’t have to be about one or the other, and suggested both a detailed book, and overview summaries should be available for the public.

Aurora is already searching for software to automate its budget and to skip manual data entry.

Johnson said that currently three people enter 30,000 pieces of data. “We are hoping to automate that with a better system,” he said.

Jonathan Travers, a partner at the Massachusetts-based nonprofit Education Resource Strategies, suggested districts can provide budget detail in many ways. One way is to focus on the strategy behind financial decisions.

He said “hundreds of pages of detail on accounting… is far less helpful than a few pages” on the ways in which the district allocates resources.

Board members also talked earlier this month about doing an audit, or hiring a consultant to help rethink the budget.

Colorado already requires outside audits of school district spending. Those audit reports look at many aspects of finance procedures, and are made public, but they lag because they focus on the actual dollar amounts after they’ve been spent.

Budgets, however, aren’t required to be audited because they are only proposed plan for where to allocate money.

At a budget hearing, one teacher said he supported Armstrong-Romero’s request for more budget information to help the board make decisions, and reminded the four new board members that they ran on a platform of transparency.